Proactive Investors - Cameco Corporation (TSX:TSX:CCO) told investors that the Canada Revenue Agency (CRA) has issued revised reassessments for the 2007 through 2013 tax years that will result in the company being refunded a total of approximately $300 million.
The uranium producer said the refund consists of $89 million in cash and $211 million in letters of credit, which it previously remitted to the Government of Canada based on prior reassessments CRA had issued in its long-standing tax dispute. The timing of the refund is yet to be determined, it added.
The company explained that a series of court decisions that were completely and unequivocally in its favour for the 2003, 2005 and 2006 tax years determined that the income earned by its foreign subsidiary from the sale of non-Canadian-produced uranium was not taxable in Canada.
Under these decisions, it said CRA has issued reassessments reducing the proposed transfer pricing adjustment from $5.12 billion to $3.25 billion, resulting in a reduction of $1.87 billion in income taxable in Canada compared to the previous reassessments issued to Cameco for the 2007 through 2013 tax years. These revisions to income result in the refund of approximately $300 million, it added.
“While the pending return of $300 million in cash and security to Cameco is positive and certainly warranted, our broader tax dispute with CRA remains ongoing,” the company said in a statement. “CRA continues to hold a further $480 million, consisting of $206 million in cash and $274 million in letters of credit, that Cameco has remitted or secured to date, tying up a significant portion of our financial capacity.”
Remaining transfer pricing adjustment
Cameco said the remaining transfer pricing adjustment of $3.25 billion for the 2007 to 2013 tax years relates to the sale of Canadian-produced uranium by its foreign subsidiary. It said it also maintains that the "clear and decisive court rulings" already rendered in the dispute also apply to these amounts and that CRA should fully reverse the remaining transfer pricing adjustments for these years and return the full amount of cash and security being held.
“In October 2021, due to a lack of significant progress on its points of contention, Cameco filed a notice of appeal with the Tax Court of Canada for the years 2007 through 2013,” Cameco added.
“We are asking the Tax Court to order the complete reversal of CRA’s transfer pricing adjustments for those years and the return of the remainder of our cash and letters of credit, with costs. In October 2022, we filed an appeal with the Tax Court for the years 2014 and 2015 and recently filed a notice of objection for 2016. The process to resolve these disputes continues.”
The company said it will not be in a position to determine the definitive outcome of the dispute for any tax year other than 2003 through 2006 until all reassessments have been issued advancing its arguments and a final resolution is reached for that particular year. CRA may also advance alternative reassessment methodologies for any tax year other than 2003 through 2006, it added.